China fines Tencent and Ant as tech crackdown ends

China has imposed a $985mn fine on the company Ant Group, a firm previously controlled by Ali Baba founder Jack Ma, as Beijing’s crackdown on the tech sector is expected to be reaching its conclusion.

Meanwhile, Tencent has been fined $410mn for regulatory breaches. This follows a wider regulatory pattern the Chinese government described as “rectification” dating to 2020 in which considerable fines were paid by Ant affiliate Ali Baba, vehicle-hire company Didi and e-commerce company Meituan.

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance,” Ant said in a statement.

The central bank and securities regulator said in a statement “Most of the outstanding problems for financial platforms have been rectified.”

The period of regulatory crackdown coincided with the introduction of new data legislation that was particularly impactful to tech companies. The Data Security Law came into effect in September 2021 whilst The Personal Information Protection Law came into effect in November the same year. Regulatory reforms also targeted education technology companies in the same period.

This approach was widely considered to be targeted at increasing the government’s control of the tech sector, which had grown rapidly in the previous decade. It is now expected that the recent fines will mark the conclusion of the harsh regulatory approach as China looks to tech for a boost to economic growth.

Government pressure on Ant began in 2020 after founder Jack Ma was publicly critical of Xi Jinping’s tech policy. Owning AliPay, which is second to Visa as the world’s largest financial services company, the group was set to make a record-breaking initial public offering (IPO) in October 2020 predicted to raise over £30bn.

One week before the planned IPO Jack Ma gave a speech at a People’s Bank of China conference in which he stated that government policy stifled tech innovation. Days later Ant’s IPO was blocked by the government and Jack Ma disappeared from public view in the immediate aftermath and still only rarely making public appearances.

In the years following Ant was forced to restructure their organisation offloading company shares to outside investors whilst paying a series of fines levied at both Ant Group and their affiliate company Ali Baba. One of the most significant changes saw Ant begin to be formally regulated as a bank, a move that saw the Alipay app broken up into several platforms offering individual financial services.

The tide began to turn back in tech company’s favour in January 2023. Guo Shuqing, a senior financial regulator in China, stated on 6th January that the “rectification” of some of the country’s largest technology companies was over. In the same week, Ant announced that Jack Ma would no longer have a controlling interest in the company with this believed to be key to the government’s regulatory stepback. Following reports of a ‘double dip’ in China’s economy, it is expected that Beijing will now look to tech companies to help stimulate growth following the assumed end of the 3-year regulatory crackdown.

Article by Nick Scott.

(Photo: Charlie fong, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons)